A sharp decline in earnings follows an uptick in non-QM loan acquisitions
MFA Financial, a major real estate investment trust (REIT) specializing in non-qualified mortgages (non-QM) and investor loans, reported a net loss of $2.3 million in the fourth quarter of 2024, a sharp reversal from the $40 million net income recorded in the previous quarter.
Craig Knutson, MFA’s CEO, attributed the loss to "sharply higher Treasury yields," which he said negatively impacted the company’s book value. However, he noted that MFA "took advantage of market conditions" by acquiring $1.2 billion in loans and securities at what he described as attractive levels.
Despite the quarterly loss, MFA’s full-year financials remained in positive territory, with GAAP net income for 2024 reaching $86.4 million, or $0.83 per basic share, up from $47.3 million in 2023. However, distributable earnings, an alternative measure that excludes certain non-cash items, declined to $1.57 per share from $1.62 in the previous year.
MFA continued expanding its non-QM portfolio, adding $470.1 million in new acquisitions during the quarter, bringing the total to $4.4 billion. Its lending subsidiary, Lima One, originated $151.1 million in business-purpose loans and generated $8.5 million in mortgage banking income. The company also increased its holdings in agency mortgage-backed securities (MBS), purchasing $463 million during the quarter, which brought its total agency MBS portfolio to $1.4 billion.
At year-end, MFA had completed eight loan securitizations in 2024, backed by $2.4 billion in unpaid principal balance. This included $1.1 billion in non-QM loans, $699.2 million in legacy reperforming and nonperforming loans, and $599 million in transitional loans.
While MFA remained active in loan acquisitions, it also saw an increase in delinquencies. The percentage of loans that were 60 or more days past due rose to 7.5% in Q4, up from 6.7% in the prior quarter.
Knutson acknowledged the volatility that has defined the past year for fixed-income investors but expressed optimism about MFA’s positioning for 2025.
“Although our total economic return was a relatively modest 5.2%, 2024 was an important year as we positioned the company for the future,” he said in a Press release. He pointed to key leadership changes, expanded investments in agency MBS, and strategic loan sales to third-party investors as measures that will strengthen the company moving forward.
Read next: MBS investors expect Fannie, Freddie privatization
Knutson said he expects "the normalization of the yield curve" to benefit MFA and other mortgage investors in 2025 and beyond.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
